108 companies have 25% of China's sows

Just 108 companies now control a fourth of China's swine production capacity, according to a list prepared for a recent swine industry forum. Unpredictable gyrations in China's hog market continue with the influx of big pig farmers, contrary to the expectations of agricultural officials. 

Pigs have historically been scattered across millions of backyard pens, sheds, and living rooms in Chinese villages. At the peak of backyard pig-farming, China's 1997 agricultural census counted over 130 million rural households raising pigs--usually one or two at a time--and those small family holdings accounted for 95 percent of the swine inventory. 

In recent years a handful of companies have been on a hog-farm construction binge. Their expansion accelerated during a 2014-17 environmental regulatory push that shut down hundreds of thousands of small farms. Then the African swine fever epidemic wiped out millions more of small farms, biosecurity requirements and a new round of subsidies favored big companies, and "pig concept" stocks became fashionable, attracting billions of dollars of capital investment. 

A list of 108 companies with at least 10,000 sows was compiled for the 7th China swine industry summit based on company financial reports, industry news, and unpublished sources. The combined sow inventory of the 108 companies as of October-November 2021 was 11.79 million head. That's about a fourth of the 44.79-million-head national sow inventory reported by the China National Bureau of Statistics' as of the end of September. 

List prepared for 7th China High-level
swine industry forum.

Muyuan Foods Group was the clear number-one company, with 2.7 million sows. Three other companies--Wens Foodstuff, New Hope-Liuhe, and Zhengbang Technology--were listed with 1 million or more sows. These top four companies had a combined 5.9 million sows. Another 15 companies had 100,000-400,000 sows each (3.2 million sows combined), 22 companies had 50,000-90,000 sows (1.4 million combined), and 67 companies had 10,000-40,000 sows (1.2 million combined).

Muyuan pulled ahead of the competition during the African swine fever crisis. A ranking from 2016 showed Wens produced more than 5 times as many hogs as Muyuan and Zhengbang, and a 2019 ranking still showed Wens in the top spot. Muyuan now has 2.7 million sows, more than double Wens' 1.2 million. 

For years Chinese agricultural officials have blamed small farmers for constant booms and busts in the hog industry--"blindly" expanding when prices are high and then killing off sows when prices drop. However, the influx of gigantic farms has perpetuated industry gyrations. 

Chinese rural news outlet Nongcai Baodian reported that China's swine industry still has excess capacity, despite farms having culled many low-productivity sows and cleared out overweight hogs after prices plummeted 50 percent in the first half of 2021. A medium-sized pig farmer in Henan Province attributed low prices in early October to "too many pigs on the market." He estimated that less than 10 percent of hogs had been produced by companies before ASF, but their share is now 20-30 percent. Hog traders told the reporter that big companies piled in when hog prices were high, with one scaled-up farm replacing dozens or even a thousand small-scale farms. The report ascertained that companies are  optimistic about next year's market. While they had culled many of their low-productivity sows, they replaced them with a roughly equal number of new gilts.

The description accompanying the swine industry forum list said that hog farming companies have culled large numbers of sows and abandoned construction projects since hog prices began dropping early in 2021. The report estimates that 150 companies had 10,000 sows at the beginning of the year, but the number dropped to 108 due to culling of unprofitable sows. The report estimates that the top 108 farms are operating at just two-thirds of their capacity--a third of barns and stalls are empty due to the crash in prices this year.

The report estimated that the current population of sows could produce 235.8 million finished hogs if each produced 20 marketed hogs per year. Hogs raised from a sow bred now would be ready for market in September 2022. 

Earlier this month Muyuan held a Q&A to reassure investors--about 15 investment funds, securities firms, and insurance companies. Cost-cutting, retirement of sows, capital expenditure plans and financial stability were the main topics. Muyuan assured investors that cash flow is normal, but also explained that the company had suspended all construction projects that were less than half-finished and is evaluating others on a case-by-case basis. The company is rushing to complete construction of slaughterhouses before the spring festival holiday. The new facilities would bring its slaughter capacity to 20 million head annually. The company hopes to reverse its losses on its slaughter business in 2022. Muyuan reported a ratio of pigs per sow of 24, suggesting its sow inventory can produce 64.8 million finished hogs. The company has 135,000 employees, enough to fully staff the new slaughterhouses, the company said.